Fight of the Century? Well, that was Joe Frazier against Muhammad Ali, New York 1971, right? Wrong! For an economist, the Fight of the Century refers to the intellectual debate between the illustrious economists John Maynard Keynes (1883-1946) and Friedrich August Hayek (1899-1992). A battle at least as hot as the boxing fight, if not even much hotter! What was this all about? And does it have to do anything with Georgia? It does… A LACK OF DEMAND… What are the causes of recessions and unemployment? Keynes had a very clear idea about this. During a slump...

Last week I discussed the economic consequences of inequality. Contrary to a traditional tenet of economics, empirical research has shown that inequality may have adverse economic consequences. Inequality increases the risk of political instability in a country, posing a threat to investments due to the fact that political unrest is highly detrimental to the profits made from any economic activity. Therefore, foreigners will bring less capital into a country when the risk of instability goes up, and even local investors will move their money over the bor...

Why should we care about income inequality? According to Nobel Prize laureate Joseph Stiglitz and Harvard economist Jason Furman, “greater inequality leads to more political instability, and greater political instability leads to lower growth” (“Economic Consequences of Income Inequality”, Federal Reserve Bank of Kansas: Journal Proceedings, 1998, pp. 221-232). Consequently, even if one does not care about income inequality directly, there may be reason to care about its indirect effects. In their article "Income Distribution, Political Instability, and ...

For many observers, the Georgian job market is a mystery. Companies are bitterly complaining about a lack of engineers, forcing them to withhold the expansion of production capacities and to cut down investments. Yet Georgian young people, who could make good fortunes by studying technical subjects, prefer to learn law, business administration and the like, qualifications that are oversupplied in the market and on average do not yield high salaries. Young Georgians, lacking information on what sells well in the job market, apply a simple decision rule ca...

One or two years ago, a Lavazza’s take-away coffee shop opened on the side of Georgia’s east-west highway in the area of Zestaponi. You always could find plenty of coffee shops in Tbilisi, but it was a novelty to have them next to the highway. Soon afterwards, another coffee bar opened along the road, and surprisingly, it was again set up close to Zestaponi. And today, there are even more take-away coffee points along that road, and they all cluster at Zestaponi. Travelling from Tbilisi to Kutaisi or Batumi, you will notice other such clusters. You can b...

In the 1930s, the American linguist Benjamin Lee Whorf put forward the hypothesis that people of different mother tongues perceive the world differently. According to linguistic relativity or Whorfianism, both the grammatical structure and the vocabulary of a language influence the way how people think. Proponents of political correctness, aiming to ban the usage of certain words that are considered to be derogatory or discriminatory, ultimately base their ideas on Whorfianism. Saying “little person” instead of “midget” may have an impact on how one thin...